comprehensive spending review

Comprehensive spending review

The Chancellor, George Osborne stood up in the House Commons to detail the largest series of public spending cuts seen in decades.

Mr Osborne told MPs that the reductions in expenditure, totalling almost £83 billion, were needed to draw Britain “back from the brink”.

The comprehensive spending review, which has been the most important in generations, would eliminate the UK’s structural deficit by 2014/15 and would see national debt falling significantly over the same period.

Current debt interest payments total £43 billion a year. Debt interest payments will be lower by £1 billion in 2012, £1.8 billion in 2013 and £3 billion in 2014, a total of £5 billion over the course of the review, the Chancellor said.

Capital spending will be £51 billion next year, then £49 billion, then £46 billion and £47 billion in 2014-15, roughly £2 billion a year higher than set out in the Budget.

Total public expenditure, which includes debt interest payments, will be £702 billion next year, then £713 billion, £724 billion and £740 billion, bringing real terms public spending to the same level as 2008.

The coalition government’s plans would set the both public services and the welfare system on what Mr Osborne described as a sustainable footing. The cost will be the loss, as predicted by the Office for Budgetary Responsibility, of some 490,000 public sector jobs by 2015.

The changes to the welfare system were perhaps the most marked of all the planned reductions in spending, with some £7 billion more of funding to be withdrawn over the next four years.

The squeeze on welfare budgets meant that the Chancellor was able to inform the House that, as an average, departmental cuts across Whitehall amounted to 19 per cent, one per cent lower than the estimate put forward by the previous Labour administration in their own plans for combating the deficit.

Mr Osborne insisted that the deep financial retrenchment was based on reform, fairness and growth, the road ahead hard but leading to a better future.

The health budget will rise by 0.4 per cent annually in real terms over the next four years, its annual spend hitting £114.4 billion by 2015.

The education budget is also to enjoy an increase in funding each year, and a £2.5 billion pupil premium pot will be set aside to support the education of poor and disadvantaged children.

Inevitably, there were cuts elsewhere, with most departments set significantly stringent spending targets for the duration of the current Parliament.

The Home Office is to lose 6 per cent a year. Police budgets are to face a 16 per cent cut over the next four years.

The MOD must deal with cuts of 8 per cent; the Foreign Office 24 per cent; and the Cabinet Office 35 per cent.

Although the Department of Business is to lose 25 per cent of its funding over the course of the next four years, the science budget is to remain at £4.6 billion a year, so protecting the teaching of and research into STEM subjects such as technology, maths and engineering.

The government also committed itself to increase spending on adult apprenticeships by £250 million a year, creating an extra 75,000 apprenticeship places.

We will all be working longer. The state retirement age for men and women is to be equalised at 65 by November 2018, and the retirement age for both men and women will then rise to 66 by April 2020, some four years ahead of previous plans. The acceleration of the changes will hit women the hardest.

Town halls are to encounter a 7.1 per cent fall per year in their funding over the next four years, with ringfenced grants facing abolition.

The Department of Energy escaped with a relatively inoffensive 5 per cent annual cut, and the Chancellor committed the government to setting up a Green Investment Bank aimed at encouraging investment in green businesses.

On tax, HM Revenue and Customs is going to have to handle a cut of 15 per cent in real terms, and has been briefed to make the savings through a reduction in admin costs and a more effective targeting of customer services.

HMRC will also be conducting the next stage of the consultation on improving the PAYE system, examining how best to manage a real time information process.

Despite the cuts, the tax authority has been given an extra £900 million over the next four years to tackle the issue of tax avoidance. The plan is that the additional resources will enable HMRC to recover some £7 billion a year in underpaid or unpaid tax by 2014/15.

The government has set its path for the next four years. Whether it leads to sustained recovery, as the coalition believes it will, or to a double-dip recession, as its opponents fear, time will tell.

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